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Fieo Lauds Raising of Export Credit Refinancing Limit for SMEs 21 Jun 2012  
Fieo Lauds Raising of Export Credit Refinancing Limit for SMEs

Fieo Lauds Raising of Export Credit Refinancing Limit for SMEs

 

NEW DELHI, June 20 The Reserve Bank of India’s (RBI) move to raise the eligible limit of the export credit refinance (ECR) facility for scheduled banks (excluding RRBs) is expected to boost lending to exporters in the micro, small and medium enterprises (MSME) segment.

The RBI, in its mid-quarter monetary policy review on June 18, had raised the ECR facility limit from 15 per cent of the outstanding export credit eligible for refinance, to 50 per cent. The move, aimed at boosting credit flow to the export sector, will come into effect from June 30.

While the apex bank will also provide additional liquidity support to banks to the tune of over Rs 30,000 crore, the rate of interest charged on the ECR facility would continue to be the prevailing repo rate, which at present is 8 per cent.

The Federation of Indian Export Organisations (Fieo) President, Mr M. Rafeeque Ahmed, emphasized that this move would help banks replenish funds earmarked for MSME exporters and ensure that money was easily available to the sector.

Banks are generally more comfortable lending to big corporate houses that focus on exports, due to the higher risk perception associated with lending to smaller exporters. The hope is that RBI’s latest move would influence these banks to look at smaller players in the export sector more favourably.

The Economic Survey 2011-12 brought to light that export credit as a percentage of net bank credit had been on the wane over the years, accounting for only 4.2 per cent as on December 30, 2011 as against 9.8 per cent on March 24, 2000.

Moreover, export credit growth had moderated to 8.4 per cent in 2011-12 (up to December 31, 2011) over and March 2011, as against 22.2 per cent growth in 2010-11, the survey showed.

Fieo also called for a reduction in interest rates to give a fillip to exports, which in May contracted 4.16 per cent, the second such fall in three months.

 

(Source: Exim India Dt. 21.06.2012)
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